Importance of Estate Planning

ESTATE PLANNING TABLE OF CONTENTS

• • 1. It Safeguards Beneficiaries
  • 2. It Safeguards Young Children
  • 3. It Saves Heirs a Large Tax Bite
  • 4. It Gets Rid of Family Headaches
  • In Conclusion

It may seem like a lot of people dedicate more time in planning their vacation, which vehicle to purchase, or even where they plan to eat than they do in estate planning—choosing who will inherit their assets after their death. It might not be as enjoyable to think about as making flight arrangements or looking at reviews of restaurants, but without estate planning, you’re unable to decide who gets your assets that you worked so long for.

Estate planning is not only for the wealthy. Without a plan in place, getting your affairs settled after you pass may have a long-lasting—and expensive—consequence on your loved ones, even if you don’t have an expensive home, big IRA, or valuable jewelry to pass on to them. Not sure that an estate plan is needed? Think about these 4 reasons why you need one, in order to keep clear of possibly devastating outcomes for your heirs.

KEY TAKEAWAYS

• Estate planning enables you to choose who is entitled to what.
• Estate planning grants you the opportunity to name your children’s guardian in the event of your early passing.
• Estate planning lessens taxes on what is left behind.
• Estate planning minimizes the chances of family conflicts and nasty legal battles.

1. Estate Planning Safeguards Beneficiaries

If estate planning was once regarded as something that only wealthy individuals needed, all that has changed. These days a lot of middle-class families need to plan for if something were to happen to a family’s bread winner (or bread winners). Ultimately, you don’t have to be super-wealthy to do well in real estate, or the stock market both that create assets that you will want to bequeath to your heirs.

Maybe you’re just leaving a second home behind, if you don’t make a decision of who receives the property after you pass, there is no control over what happens to it if you don’t make provisions beforehand.

That’s the reasoning why the main element of estate planning is appointing heirs for your assets, regardless of it’s a boathouse or high-priced artwork. Lacking an estate plan, the courts will occasionally decide who acquires your assets, a procedure that could take years, accumulate fees, and turn nasty. After all, a court has no knowledge of who the responsible sibling is, and which one should not have free accessibility to money. The courts also won’t automatically order that the surviving spouse attains everything.

If you pass away without a will, which is a crucial part of your estate plan, the courts will determine who receives your assets.

2. Estate Planning Safeguards Young Children

No one ever thinks about dying young, but if you are the parent of small children, you should prepare for the unimaginable. This is where the will part of your estate plan comes into play.

To guarantee that your children are cared for in the manner that you approve of, you will want to designate their guardians, in the case of both parents dying before the children turn 18. Without having a will of this type, again, the courts will intervene. This time it is not to decide who gets a piece of property or jewelry; it’s to determine who is going to raise your children.

3. An Estate Plan Saves Your Heirs a Large Tax Bite

Estate planning is about safeguarding your loved ones, meaning in part protecting them from the IRS. Vital to estate planning is the transferring of assets to your heirs with a focus on creating the least possible tax liability for them.

Even with just a small amount of estate planning, couples can minimize much or possibly all of their federal and state estate taxes and state inheritance taxes, that can get very expensive. There are also ways to minimize the income tax beneficiaries may have to pay. But lacking a plan, the total your heirs will owe to the government could be quite a bit.

4. Estate Planning Gets Rid of Family Headaches

We all know about the horror stories. Someone that has money passes away and the war among family members starts. One sibling might think they are entitled to more than another, or one sibling might think that they should be in control of the finances despite the fact they are known for running up debt. Such quarreling can get nasty and end up in court, with members of your family set against one another.

Putting an end to fights prior to them starting is just another reason why an estate plan is needed. This will allow you to choose who manages your assets and finances if you become mentally incapable or after you pass away, goes a long way toward squashing any family friction and guaranteeing that your assets are managed in the way you plan them to be.

Estate planning also helps you create individualized plans when needed, to make provisions for a child that has health issues or setting up a trust for someone that may be more comfortable not inheriting a large amount of money. It also helps you give more to the child that did a lot of the work of taking care of you in your later years or a lesser amount to the child whose long education you paid for while paying a lot less for their siblings.

Making the decision if you should divide your estate right down the middle is just one key task you need to determine. And by all means, if you have had more than one spouse or have children from another family, an estate plan is critical.

In Conclusion

If you wish for your assets and your loved ones to be safeguarded when you no longer are able to, you’ll need an estate plan. Without having an estate plan, your heirs may face significant tax burdens, and the courts might determine the division of your assets and even who is allowed to raise your children.

Source:

1. Fuscaldo, Donna. “4 Reasons Estate Planning Is so Important.” Investopedia, Investopedia, 27 Mar. 2020, www.investopedia.com/articles/wealth-management/122915/4-reasons-estate-planning-so-important.asp.